Flatland Metals Case Study
Flatland Metals Co. produces steel products for a variety of customers. One division of the company is Residential Products Division. This division was created in the late 1940s; its principal products since that time have been galvanized steel components used in garage door installations. The division has been continuously profitable since 1950 and in 2007 generated profits of $10 million on sales of $300 millions.
However, over the past 10 years, the growth in the division has been slow; profitability has become stagnant, and few new products have been developed, as the garage door components market has matured. The president of the company, John Stamp, has asked his senior staff to evaluate the operations of the residential Products Division and to make recommendations for changes that would improve its operations. The staff uncovered the following facts:
a. Jolene Green, aged 53, has been president of division for the past 15 years.
b. Ms Green receives a compensation package taht includes a salary of $175,000 annually plus a cash bonus based on achievement of the budgeted level of annual profit.
c. Growth in sales in the residential metal products industry has averaged 12% annually over the past decade. most of the growth has occurred in ornamental products used in residential privacy fencing.
d. Nationally, the division's market share in the overall residential metal products industry has dropped from 12% to 7% during the past 10 years, and it has dropped from 40% to 25% for garage door components.
e. The division maintains its own information systems. the systems in use today are mostly the same systems that were in place 15 years ago; however, some of the manual systems have been computerized (e.g., payroll, accounts payable, accounting).
f. The division has no customer service department. A small sales staff solicits and takes orders by phone from national distribution chains.
g. The major intradivion communication tool is the annual operating budget. No formal statements have been prepared in the division regarding strategies, mission, values, goals, or objectives, or identifying core competencies or critical succes factors.
Question:
You have been hired as a consultant for the residential Products Division. Given the introductory paragraphs, prepare a report in which you identify the major problems in the Residential Products Division regarding cost management and performance measurement, and develop recommendations to address the problems you have identified.